Thailand, the world’s largest rice exporter, is content to sit on a record stockpile as the worst U.S. drought in half a century may boost prices, according to Commerce Minister Boonsong Teriyapirom.
The country has room to store a further 20 million metric tons of unmilled rice, building on a stockpile of milled grain that the U.S. Department of Agriculture expects will climb to 12.1 million tons in 2012-2013. Thailand plans to spend a further 260 billion baht ($8.3 billion) in extending a policy to buy rice from farmers at above-market rates to boost incomes.
“We don’t have to hurry” to sell the stockpiles, Boonsong said in an interview yesterday. “We will wait for the right moment, the right price.”
Thailand’s haul is serving as a buffer against global grain reserves that the International Grains Council says are at the lowest in at least five years as droughts push corn and soybeans to records. The policy, popular with farmers, may threaten the nation’s position as the top exporter this year as buyers choose Indian and Vietnamese supplies that are about 30 percent cheaper.
“People are already making forecasts that the price of rice will go up because of the situation in the U.S.,” Boonsong said at his office on Bangkok’s outskirts. “I don’t think we will see the downside on the price of rice this year. I hope we can sell more at higher prices.”
Rice futures have gained 7.2 percent in Chicago since the end of May on prospects for a reduced crop and export curbs in India, and after the U.S. drought damaged corn crops. Corn and soybeans have soared to records, adding to global food costs that the United Nations estimates jumped 6.2 percent in July. Global rice output this year will be smaller than previously forecast, the UN’s Food & Agriculture Organization said Aug. 10.
Thailand’s government has spent about 260 billion baht to purchase 16 million tons of unmilled rice from farmers since the program began in October, Boonsong said.
The country may need to sell some inventory before the next crop is gathered in October and November, Concepcion Calpe, a senior economist at the FAO in Rome, said Aug. 1. Thai 5-percent white rice will drop 15 percent to $480 a ton by Dec. 31, according to the median of 10 estimates from traders and analysts surveyed by Bloomberg earlier this month.
The world may face a food crisis “very soon” as drought ravages corn crops in the U.S., the world’s largest grower, Shenggen Fan, director-general at the International Food Policy Research Institute said Aug. 14. Corn surged to a record $8.49 a bushel on Aug. 10. The worst monsoon since 2009 in India, the world’s second-largest rice grower, may slash production from a record, potentially lowering its shipments.
The monsoon-sown harvest in the South Asian nation may be between 5 million tons and 7 million tons below a record 91.5 million tons a year earlier, P.K. Joshi, director for the South Asia region at the Washington-based International Food Policy Research Institute, said Aug. 13.
Thailand has sought to sell rice directly to other nations after private Thai exporters offered prices that were too low, Boonsong said. The sales may lead to rice exports of as much as 9 million metric tons in 2012, he said.
“We want our export price to be higher,” Boonsong said. “And it’s proven that an average export price, government and private sector all-inclusive, is above $600 now.”
The nation agreed to sell 2 million tons to China and 1 million tons to Indonesia under government-to-government deals, Boonsong said, adding that shipments to China have started and deliveries to Indonesia will begin next month. Thailand is in talks to sell as much as 500,000 tons to the Philippines, he said. China may import 1.5 million tons this year, while Indonesia may buy 1.25 million tons, USDA data show.
“We have a very determined target for the price,” Boonsong said. “We want to sell more expensive, better quality rice. We are trying to differentiate our products.”
Rice shipments by Thailand are estimated to tumble 35 percent to 7 million tons this year, the lowest since 2000, the FAO said Aug. 6. Vietnam’s exports may drop 4.2 percent from last year to 6.8 million tons, while India’s shipments may gain to a record 6.5 million tons, according to the FAO.
Rough rice for delivery in September dropped 0.5 percent to $15.245 a 100 pounds on the Chicago Board of Trade at 2:55 p.m. in Singapore. Corn in Chicago, which traded at $8.0575 a bushel, has rallied 25 percent this year.